FDI on the Move: Cross-border M&A and Migrant Networks

Abstract

Using data on Chinese outward direct investment and migrant stocks in 96 countries from 2003 to 2014, we nd that migrant networks have a positive and signi cant impact on cross-border mergers and acquisitions (M&A), but not on green eld investment. The migrant network e ect is more pronounced for multinationals with less experience in the host country, especially for initial entrants that face greater rm, industry, and country-level information frictions. These results are robust to various estimation methods, including an instrumental variable approach that addresses potential endogeneity concerns. Our ndings demonstrate the importance of knowledge spillovers from migrant networks to multinationals for facilitating entry into new markets.